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No matter the outcome, there will be certainty about whether Britain will remain within the European Union or exit the European superstate on June 23.

There is uncertainty about what happens if Britain chooses to exit and some risks, but many financial analysts think there is a bigger problem hiding in plain sight, one which will take longer to solve, with less clear-cut outcomes.

“We believe China’s ongoing stealth devaluation of the renminbi is far more important for the global economy,” writes Albert Edwards of investment bank Société Générale. He is talking about the drop in the Chinese yuan against a basket of currencies especially since the beginning of the year, while the yuan remained more or less stable against the dollar.

The yuan is down 10 percent against this basket since last August, the first time the Chinese central bank sharply lowered its fixed exchange rate, surprising markets at the time.

“China is now exporting its deflation, and my goodness it has a lot of deflation to export. In the Ice Age world, countries need to devalue to avoid deflation,” writes Edwards.

Deflation means lower prices for goods and services. If the yuan exchange rate falls against the euro and the Japanese yen, manufacturers in Germany and Japan have to compete with precisely that: lower prices from Chinese exporters.

The U.S. chief economist of investment bank Nomura says overcapacity in the steel industry is part of the problem leading to lower prices worldwide as well as a series of competitive devaluations.

(Société Générale)

“Global excess capacity in the steel industry leads to trade problems historically. This is something we are all going to have to manage,” he said at a meeting of the Council on Foreign Relations (CfR) on June 21. “China is opening up financially which is making itself vulnerable to market dynamics.”

China has announced and carried through a series of reforms which removed certain barriers to trade and the flow of capital in order to gain access to the International Monetary Fund’s (IMF) basket of reserve currencies.

I think that China, financially speaking, is the world’s biggest problem.

— James Grant, Grant’s Interest Rate Observer

James Grant, editor in chief of Grant’s Interest Rate Observer agrees with Edwards in that China poses the biggest risk to the financial system.

“I think that China, financially speaking, is the world’s biggest problem. One day we will all wake up and hear or read that there has been a collapse in the Wealth Management Products (WMP) in the Chinese shadow banking and banking system,” he said the CfR meeting.

Wealth Management Products are pools of bank loans sold to retail investors which have a higher yield than deposits but also have higher risks because banks usually don’t report what exactly is inside these products. Grant says this financial product is close to a Ponzi scheme because maturing WMPs are being redeemed by the issuance of new WMPs.

Emma Dinsmore, co-founder and CEO of r-squared macro, hopes China will be able to reform its economy before it’s too late: “Ultimately the only way to work out the access capacity is to grow the consumer base and accept lower growth in the short term. Moving down the course is very challenging for China,” she said at the CfR meeting. “Either way, they will export more disinflation.”

Exporting more disinflation means having a lower currency, buying growth from the rest of the world, which is struggling to spur growth itself.